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U.S. Federal Issues: April 2004 Public Policy Update

FEC Proposal on Political Organizations

The Federal Election Commission (FEC) has proposed new rules related to political committees and advocacy communications that could have a dramatic impact upon nonprofits.

The proposed rule contains new language regarding the definition of "political committee" and "expenditure" in the area of campaign finance. However, the definitions are so broad that they could potentially include charities and many of their traditionally conducted advocacy, communication and public education activities. The rule would force charities to significantly and dramatically change the way they communicate, advocate and even raise funds.

The definition of political committee would be expanded to include any organization that has the influencing of elections as one of its primary purposes. While influencing elections cannot be a charity's primary purpose, the rule give the FEC several ways to prove that impacting elections is one of the organization's missions, including how much of its budget goes toward certain expenditures.

The definition of "expenditure" would include communications where the charity "promotes, supports, attacks or opposes" a particular federal candidate. However, the phrase "promotes, supports, attacks or opposes" is not defined in the proposal, so it could include a letter to donors asking them to thank certain senators for their support of a bill. Taken together, these expanded definitions would turn many charities into federally regulated political committees and limit their freedom of speech, especially on issues related to their mission.

AFP submitted comments to the FEC, asking the Commission to exempt 501(c) organizations from the proposed rule. A copy of AFP's comments are available in the Attachments section below (Acrobat Reader is required).

The FEC received more than 200,000 comments regarding the proposed rule, the largest number of responses it has received on any issue in its approximately 30-year history. According to the FEC, a large majority of the comments came from nonprofits worried about the impact of the rule on charitable organizations.

Because of the large number of comments received, and since several Commissioners with the FEC don't want to consider the complex issue during an election, no action is expected until 2005. AFP will continue to monitor the issue and alert members as necessary.

For Government Relations Chairs: This issue could be very damaging for nonprofits, although given the high number of responses, the FEC may reverse direction and consider exempting nonprofits. For now, this issue is most likely on the backburner until after the elections in November (a couple of Commissioners have indicated they would like to move forward sooner rather than later, but such a move is not probable). Many members contacted AFP about this rule, so it is important to let members know what happened, but no action will be needed for a while. FTC

Do Not Email Regulations

In March, the Federal Trade Commission (FTC) requested preliminary comments on a proposed rule related to the CAN-SPAM Act that was signed into law last year.

In the rule, the FTC specifically asks whether nonprofit organizations should be exempt from the regulations, which would restrict the distribution of unsolicited commercial emails. The CAN-SPAM Act makes it unlawful to send unsolicited commercial emails unless the emails contain the following:

1) A "clear and conspicuous identification that the message is an advertisement or solicitation" (this does not necessarily have to appear in the email subject line);

2) An ability to opt-out electronically from future emails; and

3) A valid postal address of the sender.

These requirements are not necessary if the recipient of the email has already given affirmative consent for the sender to send such emails.

Because the law affects only emails of a commercial nature, most emails sent by a charity will be exempt from the requirements. In addition, the FTC, which is responsible for implementing the regulations, does not have jurisdiction over nonprofit organizations.

AFP submitted its comments to the FTC in April, arguing that the Commission does not have jurisdiction over nonprofits and therefore cannot apply the proposed rules to the nonprofit sector. In its comments, AFP noted the confusion that would arise should certain types of emails from nonprofits be subject to the rule and others be considered exempt. AFP also pointed to the FTC's decision in the Do Not Call List, where it exempted nonprofits and for-profit fundraisers working for charities from having to comply with the List's requirements.

A response from the FTC is expected later this year. A copy of AFP's comments can be found below in the Attachments section.

For Government Relations Chairs: This is another rule that could have a dramatic impact upon nonprofits if the FTC decides to apply it to the sector. AFP believes it has a strong case for exempting nonprofits entirely from the rule, especially given the FTC's decision regarding the do not call list regulations. Members should be aware of this issue, but there is little to do now until the FTC comes back with a new set of regulations.

CARE Act

The Charity Aid, Recovery and Empowerment (CARE) Act is still awaiting action in the Senate. The bill has been filed as an amendment to a jobs bill that the Senate is expected to consider in May. There are more than 60 amendments to the bill, so there is no guarantee that the amendment will be taken up.

In April, AFP issued an action alert to members urging them to write letters to the U.S. Senators about the bill.

Both the House and Senate also continue to look at several issues related to fundraising, including contribution of used vehicles and intellectual property. The Senate Finance Committee may be holding a hearing on these issues in May or June.

AFP is looking at several different scenarios to move the CARE Act through Congress this year. In addition to the jobs bill, several other pieces of legislation may move this year through Congress and could serve as a vehicle for the CARE Act.

For Government Relations Chairs: There remains much uncertainty about the CARE Act and whether it will move, how it will move, etc. However, as is often the case in election years, Congress may suddenly decide to move very quickly on legislation in order to highlight accomplishments and get back home to campaign. In action occurs, AFP will distribute alerts and encourage chairs to follow up with their chapter members. Chairs are urged to keep members updated on the bill and have them write letters to their U.S. Senators if they haven¡¦t already.

IRS E-Filing

In late February, the IRS began accepting Forms 990, 990EZ and 1120POL electronically. In addition, Form 8868 to request an automatic extension of time to file can also be filed via email.

According to the IRS, more than two-thirds of all nonprofit organizations can file electronically now. Electronic filing is expected to dramatically increase processing times and reduce paperwork and errors.

To use the new electronic filing system, charities must work with a tax professional who uses IRS-approved software. For a list of approved IRS e-file providers, visit www.irs.gov/efile.

For Government Relations Chairs: This issue may be of some interest to members who also serve as Executive Directors or other positions in their organization where they are responsible for filing such documents.

Federal Funding for Nonprofits At Risk for Terrorism

The High-Risk Nonprofit Security Enhancement Act (H.R. 4108 in the House and S. 2275 in the Senate) would create enhanced security measures to help protect nonprofits deemed to be at high risk for terrorist activity.

To be eligible for funding, a nonprofit would have to meet some of the following criteria:

  • threats of terrorism against specific group(s) of American citizens who operate or are the principal beneficiaries or users of the nonprofits;
  • prior attacks against the nonprofit or institutions associated with or similarly situated as the nonprofit;
  • the symbolic value of the site as a highly recognized American cultural or historical institution that renders the site a possible target of terrorism; and
  • the role of the nonprofit in responding to international terrorist attacks.

Those nonprofits designated as high-risk would be eligible for federal grants and guaranteed loans to help pay for the costs of heightened security measures. Funds could not be used for security equipment that would reasonably be necessary for protection from neighborhood crime. $100 million is available for grants under the legislation.

The bill would also provide partial funding for local law enforcement entities in areas where there are concentrations of "high-risk" nonprofits. In addition, an Office of Community Relations and Civic Affairs would be created at the Department of Homeland Security to focus on security needs of nonprofits with respect to international terrorist threats.

For Government Relations Chairs: This bill has just been introduced. It is difficult to determine its viability at this point but it has a lot of strong bipartisan support. It is quite possible that this bill will see action. Depending upon their organization's issue, some members may be very interested in the legislation.

Attachments

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